The Indian Rupee (INR) made a modest recovery on Monday after plunging to an all-time low in the previous session. According to official data released today, India’s Wholesale Price Index (WPI)-based inflation rose to 1.84% year-on-year in September, up from 1.31% in the previous reading. This figure, however, fell short of the market consensus of 1.90%, indicating a cooler inflation trend despite the INR’s mild gains.
Concerns persist regarding the recent surge in oil prices, which are exacerbated by geopolitical tensions, significant sell-offs by foreign investors in the equity market, and heightened demand for US Dollars from foreign banks. These factors may continue to pressure the local currency. However, potential intervention from the Reserve Bank of India (RBI) through US Dollar sales by state-run banks could help limit further declines in the INR. Later today, the US NY Empire State Manufacturing Index for October is set to be released, which may also impact currency movements.
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, commented on the situation: “The Indian Rupee fell below the 84 per US Dollar mark for the first time due to demand from foreign banks amidst FII outflows and elevated crude oil prices. Weak domestic markets also weighed on the Rupee.”
In the United States, the annual Producer Price Index (PPI) increased by 1.8% year-on-year in September, slightly higher than the 1.9% rise seen in August, and above the market expectation of 1.6%. The core PPI also climbed 2.8% year-on-year during the same period, surpassing analysts’ forecast of 2.7%. On a monthly basis, the overall PPI remained unchanged in September, while the core PPI rose by 0.2%.
The preliminary reading of the University of Michigan Consumer Sentiment Index for October fell to 68.9, down from 70.1 in September, and below the consensus estimate of 70.8. Additionally, the five-year consumer inflation expectations stood at 3.0% in September.
Market expectations regarding the Federal Reserve’s monetary policy have shifted, with the swaps markets indicating an 86.8% probability of a 25 basis point rate cut, up from 83.3% prior to the PPI data release, according to the CME FedWatch Tool.
From a technical perspective, the outlook for the USD/INR pair remains constructive. The Indian Rupee is trading in positive territory today, and the broader trend appears favorable, with the pair remaining above the ascending trend line and the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) is positioned above the midline at approximately 64.20, suggesting that the uptrend is likely to continue.
The first resistance level for USD/INR is near the all-time high of 84.15. A sustained move beyond this point could lead to a test of 84.50. Conversely, the previous resistance level at 83.90 now acts as initial support for the pair. Should this support be breached, a decline could occur towards the 100-day EMA at 83.69, followed by the psychological level of 83.00, which represents the low recorded on May 24.
Related Topics:
